BPCL shares hit fresh 52-week low post weak earnings; what should investors do?

Bharat Petroleum Corporation Ltd (BPCL) on Wednesday reported an 82 per cent decline in net profit to Rs 2,130.53 crore in the quarter ended March 2022. According to the company, the massive slump in the net profit was due to fuel prices despite a rise in cost. After weak March earnings, BPCL closed at Rs 326 per share on the BSE on Wednesday. On Thursday, shares of the company catering to refineries and marketing dropped over 3% to hit a fresh 52-week low of Rs 312.20 per share.  

Meanwhile, though the company witnessed a massive decline in net profit, domestic and global brokerages have largely remained bullish and maintained buy call on the counter amid sharp increase in refining contribution reflecting higher realized margins, throughput and adventitious gains.  

The most aggressive target on Wednesday closing price was put out by Jefferies, which maintained a buy rating with target price of Rs 465. This is an upside of 42% from the price the share recorded on May 25.  

Brokerage house Credit Suisse gave an outperform rating on BPCL with a target price of Rs 455 per share.  

CLSA sees a target price of Rs 435 per share for the oil and marketing stock. It has also retained its buy call on the share. As per CLSA, BPCL has done well on refining integration front as compared to its peers.  

Meanwhile, domestic brokerage JM Financial and Kotak Securities too maintained a buy rating on BPCL despite the q4results of the company failed to meet their expectations. Both have given a target price of Rs 400 for the stock.  

As per JM Financial BPCL’s 4QFY22 standalone EBITDA was sharply lower in the quarter due to likely higher losses in the core marketing segment (as seen in IOCL and HPCL’s marketing business in 4QFY22). It slashed FY23/FY24 EBITDA by 11%/4% to factor in the likely risk to marketing margin, however, it maintained a BUY on valuations grounds (trading at 1.1x FY24 P/B). It said high marketing losses is a key near-term risk for the company.  

Kotak Securities said near-term outlook hinges on OMCs being allowed to raise retail auto fuel prices in a rising crude price environment. It tweaked FY2023-24E EBITDA to factor in current trends and retained BUY rating with a fair value of of Rs 400 on rollover to June 2024E, for the time being.  

Earlier, BPCL reported net profit of Rs 2,130.53 crore in the January-March period as compared with Rs 11,940.13 crore, according to a regulatory filing. 

Revenue from operations rose 25 per cent to Rs 1.23 lakh crore on higher oil prices but losses on petrol, diesel and domestic LPG sales dented the financials. 

Meanwhile, shares of BPCL were trading with over 2.5% discount on their previous clisng price to Rs 317per share on the BSE around 12.20 pm on Thursday.